Maybank IB upgrades AirAsia to Buy, target price RM2.65

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KUALA LUMPUR (April 13): Maybank IB Research has upgraded AirAsia Bhd to “Buy” (from Hold) at RM2.25 with an unchanged target price of RM2.65 and said 1Q15 was bad with low load factors (management guided mid-70%) and soft yields.

In a note today, it furthermore said that AirAsia had hedged 50% of its 1Q15 fuel requirements at USD98/bbl which put it at a disadvantage against its main competitors, Malaysian Airlines and Malindo Air, which purchase fuel on the spot market.

“But beyond 1Q15, there are reasons to look forward to. Tourist arrival numbers are back to positive growth territory and so is air traffic growth.

“AirAsia’s decision to taper capacity growth will help boost yields and load factors. These factors and combined with the current low jet fuel price will swell FY15’s profits significantly.

“We keep our earnings forecasts and target price of RM2.65 unchanged. We, however, upgrade our call to Buy (from Hold). We believe 1Q14’s weakness has been priced in and values have emerged. Our target price represents an attractive 18% upside,” it said.

At 11.16am, AirAsia rose 0.89% or two sen to RM2.27 with 593,600 shares traded.